Constant Returns to Scale or Not?

True or False?

Reference: From Practice exam 1. See Page 68 (of Jones Macro Econ Crisis Ed).

~Note that you might want to be prepared to show Increasing/Decreasing/Constant returns to scale via the TWO DIFFERENT ways noted on page 68.

False.   There are two ways to solve this.

1. Given a Cobb-Douglas Production Function,

which takes the form where )

Apply this rule to the problem above, with =(1/3)  &  =(1/2),  +<1

decreasing returns to scale.

2. Alternatively (and, grade-wise, additionally), know the following definition of Constant Returns to Scale

“With a Constant Returns to Scale production function

That is;  

Applying this rule to this problem,